Bank deposits have increased in line with credit growth since November

KOLKATA: Bank deposits grew by 10.6% between November 2023 and November 2024 along with credit growth, the latest Reserve Bank of India (RBI) data showed. Term deposits and demand deposits also saw double-digit growth in the same period.

This is a result of banks’ relentless efforts to raise deposits and a slowdown in credit expansion, particularly on the retail side, following concerns raised by the regulator over potential overheating.

“Overall, a better balance is emerging between deposit and credit growth, with the credit-deposit ratio of growth falling from stratospheric heights to more modest levels,” the RBI said in its State of the Economy report last month.

In fact, incremental deposit collections have outstripped incremental credit growth, the report indicated.

The incremental credit-deposit ratio of scheduled commercial banks was as high as 95.8% at the end of March 2024. It fell to 82.7% on November 1 with incremental deposits outpacing incremental credit during August-October, the RBI report said.

According to the latest set of data released by the RBI on Thursday, public deposits with scheduled commercial banks in the country stood at `224.7 lakh crore at the end of November 29, up from `203.2 lakh crore a year ago. Of this, demand deposits were `26.3 lakh crore, up 10.3% year-on-year while term deposits rose 10.6% to `198.4 lakh crore, RBI data showed.

Banks’ credit also increased by 10.6% to `179.6 lakh crore from `162.4 lakh crore a year ago.

The central bank said the figures are based on provisional data.

In the last two fiscal years, credit expanded faster than deposits, leading the RBI to worry about the possibility of a liquidity mismatch at the structural level. The credit-deposit growth gap was 220 basis points in early September.

This gap has now been erased due to sustained regulatory pressure over the past few months.